USD Falls as Softer Inflation Weighs on Rate Hike Expectations
The US Dollar (USD) took a hit on Friday as softer-than-expected US inflation data weighed on its value. The Bureau of Labor Statistics reported that wholesale costs for goods and services were flat in July, missing market consensus expectations.
Excluding volatile food and energy components, the core Producer Price Index (PPI) rose 0.2%, coming in slightly below market consensus expectations of 0.3%. On an annual basis, headline PPI climbed 4.7% year-over-year in July, while core PPI increased by 4.2% over the same period.
The cooler-than-expected inflation metrics have shifted expectations regarding Federal Reserve policy. According to the CME FedWatch Tool, markets are now pricing in a 34.8% probability of a U.S. rate hike at the upcoming September meeting, down from 40% immediately following the PPI data release.